9/24/08

Uganda's road to progress is paved with govt thieves

In recent months, newspapers have brought us a couple of stories based on leaked letters from President Museveni's desk. Of interest was the one in which he lamented the shambolic state of our roads, and another in which he decried the disgraceful condition of government-owned hospitals and health centres.

One can't help but feel that these were carefully choreographed leaks, because they portrayed Museveni as a caring president who was aware of the people's misery, but it also helped put a distance between himself and the mess. He blamed incompetent and corrupt bureaucrats, ministers, and contractors, and did not take any responsibility for the failure on his part as the overall nyampara (overseer) of government.

While the infrastructure falls apart, the private sector in Uganda is outdoing itself in building wonderful houses, office blocks, and hotels. As we noted before in this column, the contrast between the booming construction and the decrepit roads that lead to them, is astounding.

If you don't live in Kampala, if you return after six months the new buildings just blow you away, although many are not planned and we are turning the city into a desert by cutting trees. In Nairobi, sometimes you feel that they love trees too much. In Kampala, you sense that there is a strong anti-tree culture, which partly explains why at the level of government, it would think of giving away Mabira forest to SCOUL to cut and plant sugar there.

But quite a few Ugandans understand why you have beautiful buildings, in a filthy city, and which are served by potholed roads: Most of the taxpayers' money that would have been spent on medicines, or constructing roads is stolen and spent on private buildings (of course, we are not counting the houses built by hardworking business people and other honest citizens. But they are probably not too many).

Nearly 20 years ago, fed up with criticism about corruption in his government President Museveni argued that graft under the NRM was "better"', because unlike in the past, the thieves were investing it at home. Tell that to a mother whose child has just died because the local government-run health has no doctor or medicine, and she will hate you forever.

Superficially, however, Museveni was correct. Today we invest a lot more of our ill-gotten fortune at home, for reasons that we shall not go into here. In that sense, the NRM has achieved the unofficially stated goal of building an economy that thrives on local investment of corruption money.

There have been other unintended consequences. The Uganda Revenue Authority has become a more efficient tax collector. One can argue that it's because there are many people at the receiving end waiting to pocket the tax money, more people in government and their contractor and supplier allies in the private sector, who have a great interest in that improvement. That is because the more URA collects, the more they have to chop.

Now, the conventional view is that corruption encourages people to dodge paying taxes. However, tax avoidance and exemptions benefit relatively fewer people. Imagine the owner of a bookshop who dodges tax worth Sh2m. He breaks through, and supplies, say, the Ministry of Education with stationery worth Sh2m, but inflates it to Sh12m.

He gives the official in-charge Sh2m, and keeps the rest for himself. In this deal, he makes Sh8m. If he pays the tax of Sh2m (which ensures that the government has money to pay his inflated invoice), he remains with Sh6m. Consider that his profit.

You can see that if he were corrupt and was just content to dodge tax, his benefit would have been worth Sh2m. But by paying the tax, and then stealing from the taxpayer later, he is better by 300 per cent, because he makes Sh6m.

The next outcome of the growth of possibilities for corruption in government, results into something that you wouldn't ordinarily expect. As corruption grows, and money for medicine, school chalk, textbooks, and roads is stolen, the size of government will grow bigger not smaller– as long as URA meets it revenue targets, and donors pour in money.

The more money there is in government, the more people will want to join the public service to get a slice of it. It becomes like the lights used to trap nsenene (grasshoppers). The chap who has the brighter big lamp, will attract and therefore catch more nsenene, than the one luring them with a tadooba (wicker lamp).

And the more people join government and steal from it, the less there will be for essential public services and goods. You can expect, therefore, that the more nice houses and cars we have, the worse roads and state of government health centres will be.

Some years ago, again, Museveni said he would prefer that public service salaries remain low, in order to discourage bright young graduates from joining government, and encourage them to go into the private sector to "create wealth." He will fail, as long as corruption in government pays more than honest worth in the private sector.